If you are a director of a company the easy answer is you should have access and permission to inspect the books of your company however a recent case shows this may not always be the case!

In a recent case receivers had been appointed to a company. The managing director of the company sought permission to inspect the company’s books and records. However, the receiver had denied the managing director the right to inspect certain categories of the company accounts. The managing director sought orders from the Federal Court.

The Court was of the view that generally a director can inspect documents of his company under common law rights. In fact it is important that he or she do so. However, the Court also pointed out that if a receiver, manager or liquidator is appointed, then a director does not have the right to inspect certain categories of documents if they relate to the potential sale of the company’s assets by the receivers. The Court further pointed out that a director has residual powers.

For example, a director has the influence to challenge the appointment of the receivers in the name of the company and can also institute proceedings in the name of the company. However, the director is not allowed to do anything that will create a hindrance in the proper administration of the receivership or in any manner threaten the interest of the security holders.

From the principles on which the Court relied upon its judgement, it is clear that:-

1. Apart from the rights specified in the Corporations Act, directors have a common law right to inspect documents either in person or through an agent

2. The right to inspect documents cannot be used as a “tool” by the directors to keep a watch over the receivers;

3. The receivers have the right to refuse a director access to documents if they feel that it would lead to a potential risk to the smooth administration of the receivership and;

4. The Court has a discretionary power to permit the inspection of the documents by the directors;
   
   
5. However, in this particular case the Court was of the view that the receivers were right in not allowing the managing director to inspect the document

The Court has a discretionary power to permit the inspection of the documents by the directors
However, in this particular case the Court was of the view that the receivers were right in not allowing the managing director to inspect the documents.

As a managing director you should be concerned if the business is being conducted in a way that exposes you to personal liability, and ultimately bankruptcy, and therefore you should consider getting advice if you cannot access the company records you need.